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Gold futures traded modestly lower Friday, on track for a weekly loss, as U.S. Treasury yields jumped to levels last seen in late 2018.
Gold for June delivery
GC00,
GCM22,
fell $14, or 0.7%, to $1,934.20 an ounce, on track for a 2% fall for the week after back-to-back weekly gains. May silver
SIK22,
was down 27.6 cents, or 1.1%, at $24.345 an ounce. Silver was on track for a 5.3% weekly fall, which would be the biggest such decline for a most actively traded contract since the week ended Jan. 28, according to FactSet.
Treasury yields jumped Thursday, with 10-
TMUBMUSD10Y,
and 2-year Treasury note
TMUBMUSD02Y,
yields hitting levels last seen in December 2018 after Federal Reserve Chairman Jerome Powell affirmed that a half percentage point interest rate hike “is on the table” when policy makers meet in May and signaled the potential for more outsize rate moves ahead.
Read: Fed chief Powell backs moving more quickly on interest-rate hikes
Powell appeared open to continuing a rapid pace of monetary tightening. “It is appropriate in my view to be moving a little more quickly,” Powell said. “I also think there’s something in the idea of front-end loading,” when moving away from the central bank’s easy-money policy, he said.
“Investors are now anticipating a half-point rate hike in both May and June with the likelihood of a third consecutive increase in July becoming ever stronger,” said Rupert Rowling, market analyst at Kinesis Money, in a note. “In this environment of fast-rising interest rates, gold is likely to come under pressure as its lack of yield versus other asset classes reduces its appeal.”
“Gold’s upside and downside moves now look firmly capped with rising interest rates capping gold’s upward potential with the war in Ukraine, which looks to be worsening rather than any sign of peace in the short-term, providing a strong support,” he said. “As such, gold is likely to trade in the $1,900 to $1,950 an ounce range over the medium term.”
